Auto’s TIV to be well supported by extension of SST exemptions - MIDA | Malaysian Investment Development Authority
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Auto’s TIV to be well supported by extension of SST exemptions

Auto’s TIV to be well supported by extension of SST exemptions

05 Jan 2022

The automotive sector’s total industry volume (TIV) will be well supported by the extension of the Sales and Service Tax (SST) exemptions going into the first half of 2022 (1H22), but analysts expect TIV to slow-down in 2H22.

According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), 2021 was another adverse year due to the continued Covid-19 pandemic and implementation of movement controls during mid-2021 (i.e. Phase 1), as well as supply chain disruption, despite the on-going attractive SST exemption measures during the year.

“MAA has reported TIV of 441,100 units for the first 11 months of 2021 (11M21), a drop of 4.2 per cent year on year (y-o-y),” HLIB Research recapped.

“We are expecting continued high sales volume in coming months as original equipment manufacturers (OEMs) rush productions to meet the existing high order backlogs.

“We are expecting up to 63,900 units in December month, and 505,000 units for 2021, a marginal drop of 4.6 per cent y-o-y.”

For 2022, HLIB Research expects TIV to rebound 18.8 per cent y-o-y to 600,000 units.

The research arm noted this is mainly driven by extension of SST exemption measures until June 30, 2022, high pent-up order backlogs from 2021, exciting new model launches in 2021 and early 2022, as well as low base effect from 2021.

“2022 outlook can be broadly categorised into two halves: a strong 1H22 (average 60,000 to 65,000 units per month) driven by SST exemption, followed by a weak 2H22 (average 35,000 to 40,000 units per month) due to the after-effect of SST exemption ending, as car buyers would have brought forward their purchase.

“This effect of brought forwarded purchase was seen during the 2018 ‘tax holiday’ from June to September (when Goods and Services Tax was ‘zerorised’ but SST had yet to be re-implemented).

“Any model introduction in 2022 may soften the negative impact of post SST exemption.

“Nevertheless, we expect overall consumer sentiment to be on an improving trend as Malaysia (including the rest of the world) adapts to Covid-19 and the economy regains pace.”

Post SST exemption expiry by end June 2022, HLIB Research expects the market to again engage in competitive environment, as market demand dwindles.

“OEMs with new model launches in 2021-2022 will be better positioned to attract consumers in order to sustain sales volume into 2H22.

“Exciting new models expected in 2022 include Perodua new Alza (MBM Resources Bhd, Pecca Group Bhd and UMW Holdings Bhd), Proton new Sedan/MPV and facelift Saga (DRB-Hicom Bhd), Honda new Civic, new HR-V and new BR-V (DRB) and Toyota facelift Vios, facelift Yaris and new EV model.”

HLIB Research highlighted that the announced further SST exemption extension to June 2022 (from December 2021) has certainly been a welcomed move to the automotive industry, as there are huge order backlogs which OEMs are unlikely to fulfil by end 2021, while situation further worsened by supply chain disruptions.

“Under SST exemption, average car prices have reduced two to seven per cent; (

“As explained earlier, we expect car sales to remain high in 1H22 averaging 60,000 to 65,000 units per month.

“However, post SST exemption period, car sales is expected to drop to average 35,000 to 40,000 units in 2H22.”

Source: Borneo Post Online